4. Build an emergency fund

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Nothing can send you back to square one quicker than an unforeseen incident like losing your job, getting hurt, getting in an accident, etc. If one of those things happens, and you don’t have cash in the bank in the form of an emergency fund, then you’re going to find yourself buried in debt again.

Most financial planners will tell you to have three to six months of living expenses saved. That sounds like a lot, especially if you have zero months of living expenses saved right now. But you don’t build up savings overnight. Set up a separate savings account with your bank or an online site like ING Direct that will debit a certain amount out of your checking account each month. The account should be “safe.” You’re looking for the kind of safety you get with a money market fund or an FDIC-insured account. If it pays a little interest, that’s great, but you’re not looking to get rich off this money. This is your rainy-day fund and if there’s one thing that’s certain in life besides death and taxes, it’s that rainy days come when you’re all set to play outside.